Banking on the IoT in Financial Services

“Firms could start with the assumption that every single object in the day- to-day lives of both customers and employees will soon be able to share data,” wrote the authors of a report on the Internet of Things.

Ominous? Promising?

The authors aimed to be upbeat. The research, conducted by the crowdsourcing consulting firm Wikistrat and published by Deloitte Financial Services, was based on a virtual meeting of the minds of academics, analysts and entrepreneurs with tech and financial services backgrounds.

The researchers tasked them with imaging the possible when it comes to: What will be possible with IoT in various financial sectors?

Imagining the Possibilities

Their scenarios ranged from the mundane, such as using sensors on shipping containers and transport vehicles to better underwrite commercial marine insurance, to something on the verge of Minority Report for investors, with wealth management firms essentially “spying” on clients through sensors that can provide behavioral data and allow them to paint a truer picture of clients’ risk tolerance.

“The sheer number of ideas [that Wikistrat’s] workshop generated in a short period suggests that opportunities to capitalize on new information flows may be limited only by our collective imagination,” admired Jim Eckenrode, executive director of the Deloitte Center for Financial Services.

Then again, the target audience of the report — the financial services industry — might have an ambivalent reaction at best.

As the authors noted, as recently as 2012, fewer than 15 percent of financial service firms and fewer than 10 percent of insurance carriers had implemented or planned to implement IoT or machine-to-machine solutions.

New Realities

Those stats are already three-years old. Anything could have happened since then in IoT, and it appears they have.

Filippo De Montis, director of banking and insurance industry solutions for Software AG, sees plenty of activity already in the insurance space. From his perspective, the insurance industry is a bit more advanced in IoT than banking now.

Telematics – like the ability to monitor people’s driving behavior – can be found in cars in the UK and US Health insurers are promoting wellness by tracking insureds’ behavior with wearables. And innovators like the Climate Corporation underwrite and monitor weather insurance policies through remote, weather sensing systems.

De Montis agreed, though, that that the impact of IoT is “minimal” in the short term for banking. But he sees much the same promise as the report’s futurists did.

“In the long-term, the impact could be big in the area of payment, credit, trade finance and risk management, as IoT might enable transactions to happen without human interventions and at reduced risks, because the movement of goods and ownership changes together with the underlying transactions,” De Montis said, adding that Chinese financial services firm Ping An is already active in IoT finance with a “movable property finance business.”

Opportunities for Bankers

Everything from wearables for location-based authentication services for corporate clients and bank staff to reduce fraud risk, to using sensors and GPS to better issue payments and trade services in a global supply chain.

“The banking opportunities for IoT are worthy of experimentation by the larger banks that have transaction services and trade services businesses,” Wallace said.

“However, this experimentation should not trump the investments that banks must continue to make better use of the data they already have to improve customer experience and value for their existing products and services. There are still many gaps between the volume of data available and the percentage that is actually being used to enhance value to clients,” he said.

Translation: Let’s not start tapping into data from every single item in a consumer’s life just yet.

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